A Treatise on the Natural Philosophy of Economics
- New Horizons in Institutional and Evolutionary Economics series
Chapter 4: Individuals
The notion of the individual is of fundamental significance for economics as it stands. Economics adopts the beacon of methodological individualism, which means that all social phenomena are explained with reference to individual agency, additionally cast into a set of axiomatic assumptions that define individual rationality, seen as conceptually neatly separate from collective rationality (Elster 1989a: 13ff). Even in this framework, we can distinguish between fundamentally different paradigms depending on how far the role of uncertainty and ignorance is acknowledged. This is because under ignorance, the notion of unintended consequences looms large. This line separates strands of thought such as neoclassical equilibrium economics from others such as Austrian economics. Yet, all these different strands converge to the stance of individualism (Heath 2011).
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